Archive for the ‘Syria’ Category


Oct

7

De Minimis Rule? What De Minimis Rule?


Posted by at 10:40 pm on October 7, 2014
Category: BISCriminal PenaltiesSyria

Robbins & Myers Belgium HQ via Google Maps http://goo.gl/P9oIwo [Fair Use]
ABOVE: Robbins & Meyers Belgium


Robbins & Myers Belgium, a Belgian subsidiary of Robbins & Myers, Inc., which was recently acquired by National Oilwell Varco, pleaded guilty last week to charges that it violated U.S. sanctions on Syria when it exported stators that it manufactured in Belgium to Syria. According to the Bureau of Industry and Security (“BIS”) press release, the Belgian company was charged with violating U.S. criminal law because of the following:

The guilty plea stemmed from actions by Robbins & Myers Belgium that, in 2006, caused four illegal exports, reexports and/or transshipments of stators—important components of oil extraction equipment—that had made [sic] from steel that had been milled in the United States to a customer operating oil fields in Syria.

Say what? Is it really criminal for a foreign company to export an item just because it has some U.S. content in it? What happened to the de minimis rule? How hard would it be to say that the item consisted of more than 10 percent U.S.-origin steel to avoid suggesting that the export was illegal if there was any U.S. content?  Even though BIS used up three paragraphs in the press release patting itself on the back, it could not manage to add a sentence somewhere, anywhere, to correct this misstatement of the law?

The factual proffer that served as a basis for the guilty plea, which is supposed to contain facts sufficient to support the plea, is no better on this issue.

At all times pertinent to this case, the stators shipped by RMB to Company A in Syria were made from steel tube that Company B had milled in the United States.

Nope, being “made from steel tube … milled in the United States” is not enough to support the plea. Section 746.9(a) of the BIS rules forbids exports to Syria of items “subject to the EAR.” And section 734.3(c)(1), otherwise known as the de minimis rule, states that foreign-made items destined for Syria are not “subject to the EAR” if they contain “controlled U.S.-origin commodities … valued at 10% or less of the total value of the foreign-made commodity.” Although the rule is not clear, BIS takes the position that “controlled” here means “controlled for Syria” under section 746.9 and therefore includes any EAR99 item other than food or medicine.  Under that reading the EAR99 steel tubes would be controlled U.S.-origin commodities for purposes of the de minimis rule. We just don’t know if the tubes were more than 10 percent of the value of the foreign-made stators. And we don’t know this because the supposedly completely proffer leaves out this crucial element of the crime.

I do not doubt that in fact the U.S.-origin content here was in excess of de minimis as required by the rule for foreign-made products. My point is, however, that the BIS press release and the proffer incorrectly and misleadingly state that a criminal violation occurred because the stators contained any amount of U.S. origin goods. That is simply not a correct statement of the law, and those charged with enforcing the law should also correctly state it.

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Sep

12

Maybe Their Phones Aren’t Working


Posted by at 3:27 pm on September 12, 2014
Category: Iran SanctionsOFACSudanSyria

By CFTC via https://www.flickr.com/photos/cftc/4406624868/sizes/z/ [Public Domain]Both the Commodity Futures Trading  Commission and the Office of Foreign Assets Control announced settlement agreements under which they imposed fines of $150,000 and $200,000 respectively on the oddly named Zulutrade, an online foreign exchange broker.  Zulutrade has nothing to do with Africa but is located in Pireaus, Greece, incorporated in Delaware and registered with the CFTC (which is how OFAC and CFTC got their hooks into a company located in Greece). The OFAC announcement is here and the CFTC announcement is here.

The reason for the fines is that Zulutrade allegedly maintained accounts for over 400 persons in Iran, Sudan, and Syria. On this much, the CFTC and OFAC agree. Beyond that the two agencies have different stories about how the violations, which were not voluntarily disclosed by Zulutrade, occurred. OFAC’s explanation is simply that Zulutrade had no idea it needed to comply with U.S. sanctions, perhaps not surprising in the case of a company sitting in Greece even if incorporated in Delaware.

Zulutrade failed to screen or otherwise monitor its customer base for OFAC compliance purposes at the time of the apparent violations. This failure was the result of a lack of awareness regarding U.S. sanctions regulations.

But to listen to CFTC the problem was that Zulutrade was aware of its responsibilities, tried to comply with them and botched it.  The Zulutrade compliance program, according to CFTC, provided that Zulutrade

may delegate implementation to third party service providers or agents. The procedure also says that if implementation is delegated, “Zulutrade shall have a written agreement with the other entity outlining the other entity’s responsibilities, and shall actively monitor the delegation to assure that the procedures are being conducted in an effective manner.” However, Respondent did not follow its procedure for OF AC screening. Specifically, Respondent relied entirely upon third parties to implement its procedures but Respondent did not have written agreements with all such third parties and OF AC screening was not performed.

I do not see any way to read these two narratives as consistent. OFAC says Zulutrade had no idea it needed to comply, but CFTC says that Zulutrade knew it need to comply but delegated the responsibility to third parties, although not in the fashion required by its compliance program and, apparently, without checking to see if the third parties were in fact screening. It’s hard to explain these two different accounts of what happened other than by the fact that OFAC and CFTC are in different parts of Washington and their telephones must not be working.

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Jul

9

Syrian Oil Supplier Sanctioned; U.S. Companies Still Maintain Its Website


Posted by at 8:23 pm on July 9, 2014
Category: OFACSyria

'Syria #1 Donkey, Bashar Assad' by Freedom House https://www.flickr.com/photos/syriafreedom/6731491031/ [CC-BY-2.0 https://creativecommons.org/licenses/by/2.0/]
ABOVE: Bashar al-Assad


The Office of Foreign Assets Control (“OFAC”) today announced that it had added Pangates International Corporation, Ltd. to its list of Specially Designated National and Blocked Persons (the “SDN List”). The designation is based on Pangates having supplied oil to the Assad regime in Syria. As a result of that designation, all property of Pangates in the control of U.S. persons is blocked and all transactions with Pangates by U.S. persons are forbidden.

If you clicked the Pangates link in the previous paragraph, you will have noticed that their rather crude website is still alive and well. And you will have noticed that it was a dotcom domain, meaning it is likely supplied by a U.S. registrar, which it is. Washington-based eNom is listed as the registrar for that domain name, and it is also providing domain name services, meaning that every time you click on Pangates domain name or put its URI in a browser, eNom provides the service to Pangates of directing your traffic to the Pangates website.

On top of that, the Pangates domain name redirects to 198.23.50.69, which is an IP address assigned to LiquidNet US LLC in Pompano Beach, Florida, meaning that LiquidNet in the United States is providing web hosting services to Pangates. This is also prohibited now that OFAC has designated Pangates.

In all fairness, of course, these companies may not yet be aware of the designation or understand its impact, even though the designation specifically lists Pangates’s website in the entry. The question, then, is this: how long do you think the Pangates site will be up and running?

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May

27

Universal Jurisdiction: Export Denial Order Edition


Posted by at 8:07 pm on May 27, 2014
Category: BISSyria

Aramex Employee via http://www.aramex.com/content/uploads/109/243/46240/MainBanner_EXP.jpg [Fair Use]BIS recently announced a consent agreement with Aramex Emirates under which Aramex agreed to cough up $125,000 in connection with its export of network equipment from the U.A.E. to Syria. Of course, for the few of us remaining that do not believe that the U.S. Government can exercise jurisdiction over everyone anywhere in the world whenever it wants, the interesting question is this: why did a company in the U.A.E. get tangled up over a shipment from the U.A.E. to Syria that was legal under U.A.E. law?

At issue were network devices and software classified as ECCN 5A002 and 5D002. In the Order, BIS then has this to say:

Under the widely-known U.S. trade embargo against Syria, no item subject to the Regulations may be exported or re-exported to Syria without a Department of Commerce license, with the exceptions of certain medicines and food, as set forth at all times pertinent hereto in General Order No. 2.

General Order No. 2 notes that the prohibitions of the embargo on Syria are described in section 746.9 of the EAR, which indeed prohibits all exports and re-exports except “food and medicine” by everyone in the universe. (Don’t get confused by section 742.9 which describes another set of restrictions on Syria which would permit exports of certain EAR99 items but which have been superseded by 746.9 and is just kept in the EAR to confuse ordinary people and to keep lawyers employed.)

So, even though the EAR says that foreign persons can’t re-export items from their own country to Syria, why would anyone pay any attention to this, particularly where the export was not illegal under the laws of their own country? An attempt by the U.S. to extradite someone for such an export might not be entertained by his local courts simply because the U.S. asserts that the item originally came from the United States.

BIS’s hammer here is more likely the export denial order. Even if it has no criminal jurisdiction and no ability to enforce or collect administrative fines in such cases, it does have the power to impose an export denial order which would forbid persons within its jurisdiction from exporting anything to Aramex. That might deliver a significant economic blow to a freight forwarder and logistics provider like Aramex. In that case a $125,000 fine might appear to be a good deal.

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May

19

There’s More Than One Way to Sanction a Russian under U.S. Sanctions


Posted by at 9:09 pm on May 19, 2014
Category: Economic SanctionsOFACRussia SanctionsSanctionsSDN ListSyria

By Rakkar at en.wikipedia (Transferred from en.wikipedia) [CC-BY-SA-3.0 (http://creativecommons.org/licenses/by-sa/3.0)], via Wikimedia Commons http://commons.wikimedia.org/wiki/File%3ABashar_and_Asmaa_al-Assad_in_Moscow.jpg
ABOVE: Assad in Moscow

OFAC recently announced the designation of Russian bank Tempbank and one of its Russian officials, Mikhail Gagloev, to its Specially Designated Nationals List “for providing material support and services to the Government of Syria.”  According to OFAC, Tempbank “arranged to deliver millions of dollars in cash” to a Russian airport for pickup by “cash couriers” for the Central Bank of Syria and Gagloev “personally travelled to Damascus to make deals with the Syrian regime on behalf of Tempbank.”  Six senior officials of the Syrian government and two Syrian companies were also designated for apparently unrelated reasons.

Not surprisingly, the Russian Foreign Ministry responded that Russia believes the designations of Tempbank and Gagloev are “absolutely unacceptable” and “would like to remind the U.S. side yet again that the language of sanctions is useless and counterproductive.”  To the Russian government, the basis for which a Russian individual or entity is designated as a U.S. sanctions target is, of course, irrelevant.  Russia can, moreover, understandably disregard the reason behind OFAC’s designations because the resulting sanctions against the identified Russians are effectively the same.

In light of the designations of Tempbank and Gagloev, it is reasonable to suspect that OFAC may start designating more Russians to the SDN List for reasons unrelated to Ukraine to augment the U.S. sanctions target range.  Indeed, it is peculiar that no one had been designated to the SDN List under sanctions against Syria for almost a year until this latest development.

Perhaps, OFAC is changing course from designating Russians to the SDN List for shaky reasons like being part of Putin’s “Inner Circle,” as was the justification given for targeting the likes of Gennady Timchenko, Arkady Rotenberg and Boris Rotenberg.  Targeting someone for sanctions just because he is a Putin crony may be enough under IEEPA’s broad authorization to the President, but doing so has not been met with the same enthusiasm by others, namely the EU.  The EU has, for sure, its own reasons not to tread into designating Russian businesses and businessmen with substantial ties and influence on European markets.  However, the result, which we recently pointed out, is that U.S., EU and even Canadian sanctions relating to Russia are becoming quite the confusing patchwork to follow.

 

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